Illinois governor attacks bill to ease Chicago pension payments

CHICAGO (Reuters) – Illinois Governor Bruce Rauner on Monday criticized a bill passed over the weekend by Democratic state lawmakers to ease a looming spike in Chicago’s contributions to two of its pension funds.

“We need to stop kicking the can down the road on our pensions,” the Republican governor said in a WBEZ radio interview, adding he was disappointed that Chicago Mayor Rahm Emanuel supported the measure.

His spokeswoman declined to comment on what the governor plans to do with the bill. The mayor wanted the pension payments restructured to avoid a big property tax increase.

Under a 2010 state law, the city’s contribution to its police and fire fighter funds next year increases by $550 million to about $839 million. The bill would reduce that amount by about $220 million, to $619 million. Chicago’s payments would increase every year from 2017 to 2020, but not as much as under the 2010 law.

After 2020, the city’s contributions would be calculated at amounts that would enable the two pension systems to become 90 percent funded by 2055, which is 15 years longer than in the 2010 law. The bill also ensures Chicago makes required payments and allocates proceeds from any future city casino to the public safety worker pension funds.

“We are skeptical at this time that revenues from a casino alone are the answer to the city’s problem,” said Helen Samuelson, a Standard & Poor’s analyst. “However, these revenues may be one component of a larger plan that has yet to be unveiled by the city.”

While Emanuel pushed state lawmakers for a city-owned casino, legislation failed to advance, although lawmakers will be back in session this month.

Moody’s Investors Service, which downgraded Chicago’s credit to junk last month, has said that a reduction in the city’s pension contributions would jeopardize the retirement funds’ long-term solvency.

“As the plans approach insolvency, risks to the city’s solvency will grow,” Moody’s noted in a report last month.

“But it doesn’t go away. It pushes (the funding problem) into the future,” said Dan Solender, lead portfolio manager at Lord Abbett.

The city scheduled a nearly $112 million bond sale this week to continue the conversion of certain variable-rate debt to fixed-rate bonds to end related bank letters of credit and interest-rate swap agreements.